NAFTA gets a new name, but little else has changed

Gordon Ritchie is a former Canadian ambassador for trade negotiations and deputy chief negotiator of the Canada-U.S. free-trade agreement

After more than a year of Trumpian pyrotechnics, the deal is finally done.

U.S. President Donald Trump can boast to his more gullible followers that he has, indeed, met his promise to tear up NAFTA, a.k.a. “the worst trade deal in history.” He claims Canadians have used the agreement to treat Americans unfairly, with high tariffs and huge surpluses. In another extraordinary, rambling, stream-of-consciousness press conference on Monday, the President trumpeted the success of his negotiating strategy – just in time for the midterm congressional elections.

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On closer inspection, the tentative agreement reached late Sunday night is remarkably similar to the deal Canada was prepared to accept nearly one year ago. But in obedience to the Trump negotiating playbook, we first had to endure the escalation of increasingly unhinged rhetoric and the imposition of mutually destructive tariffs before the Great Negotiator agreed to declare victory.

The main change is the brand name: the United States-Mexico-Canada agreement, or USMCA. That enables the President to declare the end of the North American free-trade agreement.

What else has changed beyond the brand?

U.S. Trade Representative Robert Lighthizer has been forced to end his quixotic crusade to eliminate Chapter 19’s discipline of unfair American trade remedies (although it has been renumbered). The investor-state dispute provisions (Chapter 11), which have been highly detrimental to Canada, have been removed.

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There will be no “national security” tariffs on automobiles. There will be no change in government procurement, which will continue to be governed by World Trade Organization rules. The United States has abandoned its last-minute attempt to remove the protections for Canada’s cultural industries.

Meanwhile, Canada has agreed to expand duty-free access to our domestic market for U.S. milk producers – reportedly slightly more than was already offered in the Trans-Pacific Partnership negotiations with the previous administration. This affects a fraction of 1 per cent of our total exports. The highly contentious class 6 and 7 milk products have also been normalized. I suspect this will, as usual, be accompanied by further subsidies for Canadian dairy farmers, but will have little or no impact on Canadian consumer prices.

Although this will be largely ignored, there has also been a great deal of work done by the professional negotiators to modernize a large number of technical areas of NAFTA. This has proceeded under the radar and quite possibly unbeknownst to Mr. Trump. The devil will lie in the details that, when they become available, will be of great interest to a small number of specialists.

What about the steel and aluminium tariffs Mr. Trump imposed on Canada under the admittedly phony pretext of “national security”? These are real and have done damage on both sides of the border. The chief executive of Ford has announced that it cost the automaker more than US$1-billion last year alone. The head of the U.S. Steelworkers’ union has come out against these measures. They remain in place because Canada has already responded to them with dollar-for-dollar retaliation. There is now an opportunity for both sides to lay down their arms. Time will tell.

Parallels have been drawn with the highly dramatic conclusion of the Canada-U.S. free-trade agreement, which I helped negotiate about 30 years ago. I do not agree.

First, we were building from scratch the biggest trade agreement between any two countries in history, breaking new ground at every step, not rebranding and modifying an existing agreement.

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Second, we were dealing with leaders (Ronald Reagan and James Baker) with vision and integrity. Our task was thus in some ways harder, and in others much easier, than that facing our current leadership. They appear to have preserved, against difficult odds, the extraordinarily successful economic arrangement that has governed Canada-U.S. trade for three decades and will continue for the foreseeable future.

In Ottawa, Prime Minister Justin Trudeau and Minister of Foreign Affairs Chrystia Freeland commented on the signing of a tentative USMCA trade deal that is likely to replace NAFTA.The Globe and Mail

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